QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-37416

PEOPLE’S UTAH BANCORP

(Exact name of registrant as specified in its charter)

UTAH

87-0622021

(State or other jurisdiction of

(IRS Employer

incorporation or organization)

Identification No.)

1 East Main Street, American Fork, Utah

84003

(Address of principal executive offices)

(Zip Code)

(801) 642-3998

Registrant’s telephone number, including area code

Not Applicable

(Former name, former address, and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes No ☐

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period forcomplying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes No ☒

The number of shares of Registrant’s common stock outstanding on October 31, 2018 was 18,719,496. No preferred shares are issued or outstanding.

See accompanying notes to the unaudited consolidated financial statements.

3

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in thousands, except share and per share data)

2018

2017

2018

2017

Interest income

Interest and fees on loans

$

27,420

$

18,843

$

80,276

$

53,610

Interest and dividends on investments

1,679

1,820

5,018

5,327

Total interest income

29,099

20,663

85,294

58,937

Interest expense

1,917

754

5,190

2,269

Net interest income

27,182

19,909

80,104

56,668

Provision for loan losses

1,925

900

5,450

2,000

Net interest income after provision for loan losses

25,257

19,009

74,654

54,668

Non-interest income

Mortgage banking

1,668

1,686

4,811

5,625

Card processing

826

704

2,347

1,991

Service charges on deposit accounts

737

636

2,114

1,750

Net gain (loss) on sale of investment securities

-

(486

)

336

(499

)

Other

563

500

1,970

1,602

Total non-interest income

3,794

3,040

11,578

10,469

Non-interest expense

Salaries and employee benefits

9,885

8,813

30,504

24,542

Occupancy, equipment and depreciation

1,476

1,164

4,430

3,369

Data processing

890

650

2,823

1,986

Marketing and advertising

342

343

1,109

954

FDIC premiums

239

135

867

391

Acquisition-related costs

(118

)

484

232

660

Other

2,566

1,525

7,186

4,961

Total non-interest expense

15,280

13,114

47,151

36,863

Income before income tax expense

13,771

8,935

39,081

28,274

Income tax expense

3,288

2,697

9,127

9,021

Net income

$

10,483

$

6,238

$

29,954

$

19,253

Earnings per common share:

Basic

$

0.56

$

0.35

$

1.60

$

1.07

Diluted

$

0.55

$

0.34

$

1.58

$

1.05

Weighted average common shares outstanding:

Basic

18,713,410

17,976,066

18,664,339

17,933,010

Diluted

19,010,600

18,396,664

18,979,405

18,355,136

See accompanying notes to the unaudited consolidated financial statements.

4

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in thousands)

2018

2017

2018

2017

Net income

$

10,483

$

6,238

$

29,954

$

19,253

Other comprehensive income / (loss)

Unrealized holding (losses)/gains on securities available-for-sale

(1,161

)

349

(4,948

)

787

Income tax benefit/(expense)

290

(133

)

1,237

(301

)

Unrealized holding (losses)/gains on securities available-for-sale,

net of tax

(871

)

216

(3,711

)

486

Total comprehensive income

$

9,612

$

6,454

$

26,243

$

19,739

See accompanying notes to the unaudited consolidated financial statements.

5

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Accumulated

Additional

Other

Common

Paid-in

Retained

Comprehensive

(Dollars in thousands, except share and per share data)

Shares

Amount

Capital

Earnings

Income (Loss)

Total

Balance as of January 1, 2017

17,819,538

$

178

$

68,657

$

160,692

$

(1,010

)

$

228,517

Comprehensive income

-

-

-

19,253

486

19,739

Cash dividends ($0.25 per share)

-

-

-

(4,483

)

-

(4,483

)

Share-based compensation

-

-

382

-

-

382

Exercise of stock options

203,113

2

1,268

-

-

1,270

Balance as of September 30, 2017

18,022,651

$

180

$

70,307

$

175,462

$

(524

)

$

245,425

Balance as of January 1, 2018

18,511,797

$

185

$

84,532

$

174,804

$

(2,103

)

$

257,418

Comprehensive income

-

-

-

29,954

(3,711

)

26,243

Cash dividends ($0.30 per share)

-

-

-

(5,597

)

-

(5,597

)

Share-based compensation

-

-

683

-

-

683

Exercise of stock options

207,699

2

883

-

-

885

Balance as of September 30, 2018

18,719,496

$

187

$

86,098

$

199,161

$

(5,814

)

$

279,632

See accompanying notes to the unaudited consolidated financial statements.

6

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended

September 30,

(Dollars in thousands)

2018

2017

Cash flows from operating activities:

Net income

$

29,954

$

19,253

Adjustments to reconcile net income to net cash provided by operating activities:

Provision for loan losses

5,450

2,000

Depreciation and amortization

2,401

1,926

Deferred income taxes

(1,160

)

(736

)

Net amortization of securities discounts and premiums

1,991

2,188

Increase in cash surrender value of bank-owned life insurance

(460

)

(382

)

Share-based compensation

683

382

Gain on sale of loans held for sale

(3,099

)

(4,061

)

Originations of loans held for sale

(162,308

)

(172,397

)

Proceeds from sale of loans held for sale

167,811

186,542

Net changes in:

Accrued interest receivable

(1,172

)

(629

)

Other assets

(2,546

)

(1,071

)

Accrued interest payable

71

(46

)

Other liabilities

7,739

3,612

Net cash provided by operating activities

45,355

36,581

Cash flows from investing activities:

Net change in loans held for investment

(93,643

)

(97,227

)

Purchase of available-for-sale securities

(30,832

)

(24,599

)

Purchase of held-to-maturity securities

-

(12,198

)

Proceeds from maturities/sales of available-for-sale securities

32,504

132,578

Proceeds from maturities of held-to-maturity securities

6,930

9,323

Purchase of bank-owned life insurance

(2,250

)

-

Purchase of premises and equipment

(8,659

)

(6,137

)

Proceeds from sale of other real estate owned, net of improvements

438

270

Net change of non-marketable equity securities

(525

)

(132

)

Net cash (used in) provided by investing activities

(96,037

)

1,878

Cash flows from financing activities:

Net increase in deposits

57,300

103,107

Proceeds related to exercise of stock options

885

1,270

Net change in short-term borrowings

2,000

574

Cash dividends paid

(5,597

)

(4,483

)

Net cash provided by financing activities

54,588

100,468

Net change in cash and cash equivalents

3,906

138,927

Cash and cash equivalents, beginning of period

51,027

67,938

Cash and cash equivalents, end of period

$

54,933

$

206,865

Supplemental disclosures of cash flow information:

Cash paid for interest

$

5,119

$

2,315

Income taxes paid

$

11,032

$

10,724

Supplemental disclosures of non-cash investing transactions:

Reclassifications from loans to other real estate owned

$

2,985

$

425

Unrealized (losses) / gains on securities available-for-sale

$

(4,948

)

$

787

Measurement period adjustment to goodwill

$

(335

)

$

-

See accompanying notes to the unaudited consolidated financial statements.

7

PEOPLE’S UTAH BANCORP AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 — Basis of Presentation

Nature of operations and basis of consolidation — People’s Utah Bancorp, Inc. (“PUB” or the “Company”) is a Utah corporation headquartered in American Fork, Utah. The Company operates all business activities through its wholly-owned banking subsidiary, People’s Intermountain Bank (“PIB” or the “Bank”), which was organized in 1913. The Bank is a Utah state chartered bank. The Bank operates under the jurisdiction of the Utah Department of Financial Institutions, and its deposits are insured by the Federal Deposit Insurance Corporation (“FDIC”). The Bank is not a member of the Federal Reserve System; however, PUB is operated as a bank holding company under the Federal Bank Holding Company Act of 1956 and is the sole shareholder of the Bank. Both PUB and the Bank are subject to periodic examination by applicable federal and state regulatory agencies and file periodic reports and other information with the agencies.

PIB is a community bank that provides highly personalized retail and commercial banking products and services to small and medium sized businesses and individuals. Products and services are offered primarily through 26 retail branches located throughout Utah and southern Idaho. PIB has three banking divisions, Bank of American Fork, Lewiston State Bank, and People’s Town & Country Bank; a leasing division, GrowthFunding Equipment Finance; and a mortgage division, People’s Intermountain Bank Mortgage. The Bank offers a full range of short-term to long-term commercial, personal and mortgage loans. Commercial loans include both secured and unsecured loans for working capital (including inventory and accounts receivable), business expansion (including acquisition of real estate and improvements), and purchase of equipment and machinery. Consumer loans include secured and unsecured loans to finance automobiles, home improvements, education, and personal investments. The Bank also offers mortgage loans secured by personal residences. The Bank offers a full range of deposit services typically available in most financial institutions, including checking accounts, savings accounts, and time deposits. The Bank solicits these accounts from individuals, businesses, associations and organizations, and governmental entities.

The interim condensed consolidated financial statements include the accounts of the Company together with its subsidiary Bank. All intercompany transactions and balances have been eliminated.

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial information. In the opinion of management, the interim statements reflect all adjustments necessary for a fair presentation of the financial position, results of operations and cash flows of the Company on a consolidated basis and all such adjustments are of a normal recurring nature. These financial statements and the accompanying notes should be read in conjunction with the Company’s audited financial statements for the year ended December 31, 2017, which are included in the Company’s 2017 Form 10-K. Operating results for the three months and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018, or any other period.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of real estate acquired through foreclosure, deferred tax assets, and share-based compensation.

Earnings per share — Basic earnings per common share represents income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflect additional common shares that would have been outstanding if dilutive potential common shares had been issued. Potential common shares include shares that may be issued by the Company for outstanding stock options determined using the treasury stock method and for all outstanding restricted stock units (“RSU”).

8

Note 1 — Basis of Presentation – Continued

Earnings per common share have been computed based on the following:

Three Months Ended

Nine Months Ended

September 30,

September 30,

(Dollars in thousands, except share and per share data)

2018

2017

2018

2017

Numerator

Net income

$

10,483

$

6,238

$

29,954

$

19,253

Denominator

Weighted-average number of common shares outstanding

18,713,410

17,976,066

18,664,339

17,933,010

Incremental shares assumed for stock options and RSUs

297,190

420,598

315,066

422,126

Weighted-average number of dilutive shares outstanding

19,010,600

18,396,664

18,979,405

18,355,136

Basic earnings per common share

$

0.56

$

0.35

$

1.60

$

1.07

Diluted earnings per common share

$

0.55

$

0.34

$

1.58

$

1.05

Reclassifications —Certain amounts in the prior period’s financial statements have been reclassified to conform to the current period’s presentation.

Impact of Recent Authoritative Accounting Guidance —The Accounting Standards Codification™ (“ASC”) is the Financial Accounting Standards Board’s (“FASB”) officially recognized source of authoritative GAAP applicable to all public and non-public non-governmental entities. Periodically, the FASB will issue Accounting Standard Updates (“ASU”) to its ASC. Rules and interpretive releases of the SEC under the authority of the federal securities laws are also sources of authoritative GAAP for us as an SEC registrant. All other accounting literature is non-authoritative.

In March 2017, FASB issued ASU 2017-08, "Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities." The ASU requires entities to amortize the premium on certain purchased callable debt securities to the earliest call date, which more closely aligns the amortization period of premiums and discounts to expectations incorporated in the market prices. Entities will no longer recognize a loss in earnings upon the debtor's exercise of a call on a purchased debt security held at a premium. The ASU does not require any accounting change for debt securities held at a discount; therefore the discount will continue to be amortized as an adjustment of yield over the contractual life of the investment. This ASU is effective for interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted for all entities. The adoption of ASU No. 2017-08 is not expected to have a material impact on the Company's Consolidated Financial Statements.

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments." The ASU significantly changes the impairment model for most financial assets that are measured at amortized cost and certain other instruments from an incurred loss model to an expected loss model. This ASU is effective for interim and annual reporting periods beginning after December 15, 2019. Early adoption is permitted for all entities beginning after December 15, 2018, including interim periods within those fiscal years. The Company is in the process of identifying required changes to the loan loss estimation models and processes and evaluating the impact of this new guidance. Once adopted, we expect our allowance for loan losses to increase. However, until our evaluation is complete, the magnitude of the increase will be unknown.

In February 2016, the FASB issued ASU 2016-02, "Leases (ASC 842)." The guidance in this ASU requires most leases to be recognized on the balance sheet as a right-of-use asset and a lease liability. It will be critical to identify leases embedded in a contract to avoid misstating the lessee’s balance sheet. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification will be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. This ASU is effective for interim and annual periods beginning after December 15, 2018. We are currently evaluating the impact of this guidance on our Consolidated Financial Statements and the timing of adoption. The Company will compile an inventory of all leased assets to determine the impact of ASU 2016-02 on its financial condition and results of operations. Once adopted, we expect to report higher assets and liabilities on our Consolidated Balance Sheets as a result of including right-of-use assets and lease liabilities related to certain banking offices and certain equipment under noncancelable operating lease agreements, which currently are not reflected in our Consolidated Balance Sheets. We do not expect the guidance to have a material impact on the Consolidated Statements of Income or the Consolidated Statements of Changes in Shareholders’ Equity.

9

Note 1 — Basis of Presentation – Continued

In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606)”, which defers the effective date of Accounting Standard Update ASU No. 2014-09 one year. ASU No. 2014-09 created Topic 606 and supersedes Topic 605, Revenue Recognition. The core principle of Topic 606 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In general, the new guidance requires companies to use more judgment and make more estimates than under current guidance, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which provides clarifying guidance in certain narrow areas and adds some practical expedients, but does not change the core revenue recognition principle in Topic 606. ASU No. 2015-14 is effective for interim and annual periods beginning after December 15, 2017. For financial reporting purposes, the standard allows for either full retrospective adoption, meaning the standard is applied to all of the periods presented, or modified retrospective adoption, meaning the standard is applied only to the most current period presented in the financial statements with the cumulative effect of initially applying the standard recognized at the date of initial application. The Company adopted this standard on January 1, 2018 using the full retrospective method.

A significant amount of the Company’s revenues are derived from net interest income on financial assets and liabilities, which are excluded from the scope of the amended guidance. Revenue streams reported as deposit fees and other service charges, which include transaction based deposit fees, and interchange fees on credit and debit cards, are within the scope of Topic 606. The Company completed its assessment of revenue streams and associated incremental costs of contracts affected by the standard. The Company’s adoption of this standard did not change the timing or the amount of revenue recognized in prior periods. However, the presentation of certain costs associated with card processing will now be offset against card processing revenue in non-interest income. The change in presentation resulted in $1.8 million of expenses for the nine months ended September 30, 2018 being netted against card processing income and reported in non-interest income instead of as payment and card processing expenses in non-interest expense. In addition, to conform to the current period presentation, $1.6 million of card processing related expenses for the nine months ended September 30, 2017, were reclassified from payment and card processing expense in non-interest expense to being netted against card processing revenue in non-interest income. The Company elected to apply the practical expedient and therefore does not disclose information about remaining performance obligations that have an original expected term of one year or less and allows the Company to expense costs related to obtaining a contract as incurred when the amortization period would have been one year or less.

The following table presents the impact of adopting of the new revenue standard on our Statements of Income for the nine months ended September 30, 2018 and 2017: